Why was the TVIX Down 30% Today While the Vix Rallied?

Many people at the trading desks have been getting questions about why the TVIX VelocityShares Daily 2x VIX Short Term ETN (NYSE:TVIX) is down 30% while the VIX was up 3% today. Since the ETN is supposed to increase at 2x the rate of the VIX, TVIX should have been up 6%.

ValueWalk spoke to some people at the trading desks, who specialized in ETN/ETFs, and the answer is that they didn’t really have a good answer. The best explanation was as follows:

On 2/21 Velocity Shares halted creations of TVIX, which essentially made it a closed end fund no longer really related to the underlying index. Apparently, the premium shot up a lot last night (again, they are not too sure exactly why), and has just come in to more “normal levels” today. However, we will report more when/if we get a better answer.